When Preparing a Statement of Cash Flows Using the Indirect

question 29

Multiple Choice

When preparing a statement of cash flows using the indirect method, an increase in inventory will result in an adjustment to reported net income because

• A)cost of goods sold on an accrual basis is less than on a cash basis.
• B)inventory was paid for with cash, but is still on hand at the end of the period.
• C)acquisition of inventory is an investment activity.
• D)inventory purchased created smaller cash outflows than cash inflows received from inventory sales.